In a year that featured the European debt crisis and volatile stock markets, the Ontario Teachers’ Pension Plan managed to produce a rate of return of 11.2%, pushing net assets to a record high of $117.1-billion.

In a year that featured the European debt crisis and volatile stock markets, the Ontario Teachers’ Pension Plan managed to produce a rate of return of 11.2%, pushing net assets to a record high of $117.1-billion.

But the performance in 2011, driven by solid returns in private-capital, fixed-income and infrastructure investments, was not enough to insulate the country’s largest single-profession pension plan from its “chronic” problem: a funding shortfall.

For the tenth year in a row, Teachers is facing a preliminary funding shortfall because the cost of future pensions outstrips plan assets and future contributions. This time, the number is $9.6-billion as of Jan. 1, 2012.

And it comes even though the plan’s sponsors raised contribution rates and lowered benefits to balance the fund last year.

“Our liabilities, that is, the projected cost of providing future pensions, continue to outpace our projected asset growth,” said Jim Leech, president and chief executive of Teachers. “Accordingly, we are working with our sponsors, Ontario Teachers’ Federation and the Ontario government, to advise them on the various options for closing this gap at a reasonable cost.”

Mr. Leech said the latest funding shortfall “isn’t a crisis by any means,” though he conceded immediate “levers” could be pulled to increase government and member contributions and reduce inflation protection for plan members would not be enough to “cure” the problem.

“I think all the parties would like to deal with the demographic and systemic issues here and solve it,” Mr. Leech said Tuesday after the plan’s annual results were released. He noted the Ontario government indicated in its latest budget that it would like to take action on the shortfall this year, long before the required deadline in 2014.

A separate calculation prepared by an independent actuary for accounting purposes, called the financial statement valuation, shows the Teachers’ pension plan ended 2011 with a deficit of $45.5-billion, compared to $39.4-billion a year earlier.

Among the funding issues facing the Teachers’ plan is that many of its pensioners have been retired for longer than they worked. There are now 2,600 retired teachers over the age of 90, including 102 that have reached the century mark.

At the same time, the ratio of active teachers to retired ones is declining, meaning there are fewer contributors to bear the burden of the plan.

The amount paid out in benefits passed contributions in the mid-1990s, and the gap today is expected to more than double to $4.1-billion by 2131.

Persistently low interest rates, the economic outlook, and the after-effects of the global financial crisis continued to weigh on the pension fund’s performance in 2011.

The steady decline in interest rates has required pensions to hold more assets to fund a typical pension. And the Teachers’ pension plan spreads significant losses and gains over a number of years, meaning the losses sustained in 2008 will continue to “haunt” the fund through the current year, Mr. Leech said.

Nevertheless, the $11.7-billion contribution to net assets in 2011 included $1.4-billion in “value-added returns,” which represent returns above the fund’s composite benchmark.

And Teachers said the plan is active, rather than passive, an investment style adopted in 1990 that has added $53-billion to the plan’s asset size.

Neil Petroff, executive vice-president and chief investment officer at Teachers, said the fund expects to seek out “opportunistic” investments in the aftermath of the European debt crisis.

“The debt situation is not solved, but they’re going to solve it by selling assets — infrastructure, maybe lotteries,” he said. “Those are the opportunities they will be looking at.”

However, Mr. Leech said Teachers will not shop for assets sprung loose by the European crisis if there is a great rush by other investment funds to do so.